TNAG-2445-FCO40-3560-Internal-political-situation-in-Hong-Kong-1992 — Page 31

CONFIDENTIAL

18

Kinz01/3

Office of the

British Senior Representative

Sino-British Joint Liaison Group

P F Ricketts Esq

Hong Kong Department FCO

Dear Peter,

не

Mr Morris

16 April 1992

You might like to show His and the Governor's Comment le ite Covernor-

designate

HONG KONG POLITICAL SITUATION: THE BUDGET

1.

Echeth

The most significant event in the period since my last letter in this series has been the Budget. The reaction of LegCo to the Budget has demonstrated in a very specific way the extent of political change in Hong Kong since last year's direct elections and has graphically illustrated the new dimension which HKG must face from now on.

2. By any standards, the Budget which Hamish Macleod presented to LegCo on 4 March was a sound and sensible one. The initial reaction of most commentators was positive: it was seen as prudent and balanced, deliberately uncontroversial, and aimed at the 'man in the street'. The Financial Secretary was also able to announce a comfortable surplus of $15.1 billion, reserves of $98.2 billion by the end of the year, and forecast reserves of $71.6 billion by 1997.

3. As expected, UDHK immediately launched a vigorous attack on the Budget, an attack motivated, we think, as much by UDHK's perceived need to be seen as an effective opposition to the government as by real concerns on the substance. Martin Lee declared that it did not do enough for the 'sandwich class' - those who are too rich for welfare benefits and subsidised housing, yet too poor to be able to afford to live comfortably and said that his party would vote against it unless it was suitably amended. Most prominent of UDHK's demands was their call for a substantial increase in personal tax allowances. UDHK's attitude is at least in part opportunist, but not necessarily more so than the norm in any democratic society.

24/10

The

CONFIDENTIAL